From one three. This is business I'm your host David Brown, behind every successful business, there's always a hard fought war at the public. Rare It gets to see up close in business. Wars are going to be delving into the most iconic and fascinating battles among arrivals like Mcdonald's versus Burger, King Nike versus Adidas or Coke versus Pepsi.

Others may be less well known, but they'll be just as dramatic you'll get a close inside look into the dynamic, sometimes commanding and cunning. Entrepreneurs who drive these companies will learn about the strategies these business titans used to trump their rivals. Today we take you to the front lines with an eight episode series on the battle between Netflix and blockbuster and eventually HBO. It was a war. It lasted eight grueling years it left behind casualty's, thousands of hollowed out buildings and economic losses in the billions. Maybe you are your parents remember those times back in the 90s when you get that itch for a movie and hop into your car

turn on the radio head out for blockbuster. You remember you pick out your vhs or dvd and stand in line trying to ignore all the popcorn and candy at every turn. If you were lucky they we had the movie you came for, but often you left with a second or third choice and a lot of times the rental fees turned out to be just a down payment, because all too often they were hefty late fees too Around one thousand, nine hundred and ninety seven along A guy named Mark Randolph. He was a Silicon Valley, marketing wizard with a mind like a Waring blender, and he had a mathematician friend named Reed Hastings real forward thinking, guy computer programmer Well, Randolph in Hastings came up with a whole new model for distributing movies to consumers. And read and Mark came up with Netflix, they knew they'd have to take on

mother of all movie rental chains blockbuster what they didn't know. What they didn't even see coming was that eventually, their business What up in network television too and change? The entire movie industry bottom line, if you like lots of movie, voices at the touch of your remote or your smart phone screen. Truth is you can thank haste. In Randolph Ryder Gina Keating takes us to the moment when the possibility of all this crystallize, wars. We make shows that we hope entertain you, but we'd love it. If you learn something too Opening myself to learning more about the world is one of the reasons that I listen to my favorite podcasts and it's so why I love. Reading the economist, the economist is a weekly magazine that inside an opinion on international and US news politics, business finance, science, technology, arts and the environment. It helps read,

It's like you and me make a little more sense of what's going on in the world around us, and it's been doing that for over one one hundred and seventy years. I started reading the economy twenty five years ago, when I noticed it had a sense of humor and it breath of subject matter in depth of coverage, the no one else had, and no one else has today. Where else can you find in one place smart thoroughly, researched and compellingly written stories about, say why Russia is ambivalent about climate change? How the late Ric Ocasek took new wave mainstream and a law banning extramarital sex yeah. You may not have heard that last one unless you've been reading the economist look, the economist is the smart Guide to the force is changing our world and right now you can get a free copy for your free print copy, economists, just text business wars. All one word,

ninety nine thousand again, that's a free print copy of the economist and all you have to do is text business wars. All one word, two hundred and ninety nine thousand from wandering. This is business wars, it was January, two thousand and seven park City Utah place was packed with independent filmmakers hoping to find distributors at the Sundance Film Festival,

John Antioco, the ceo of blockbuster the windshield of his rented Cadillac Escalade at the ski chalets, stacked up the mountain side. Antiok oh, was then in his late 50s, with a wreath of salt pepper, hair in an aquiline nose that made him look like a short box or a roman emperor. He can't remember what he wore that Sunday afternoon, but he favored plane, starched white shirts, open necked with a blue blazer and slacks. His mood was confident exultant, even but he didn't want to get too far ahead of himself. The speed was packed with impatient drivers and he was looking for a house number. He escalates wheels. Crunched slowly over the snow, packed streets. Antiok oh didn't want to be late for his meeting, but he

so didn't want to name one of the hipsters in designer boots and winter gear slipping and sliding along side his car they're all trying to get to the glitzy parties and film premieres on main street. The Sundance festival that attract All these la types wasn't really antiochos thing. He preferred to spend his free weekends at his ranch outside Dallas pottering, putting up deer feeders inspecting fences watching his wife, LISA Ryder Prize Arabian show horse. Every few months he visited New York to hang with pals from his old neighborhood. They spend hours in chic, restaurants they couldn't afford in their salad days. Nick shepherd is high strung but loyal chief operating officer and right hand man at blockbuster. I convinced him to attend this festival as a sort of victory lap. They had found the formula to kill Netflix dead once and for all.

And then, as he and Nick drank coffee, an overcrowded cafe, gazed out at the cloud shrouded mountains Nick Cell phone rang. It was Hastings from Netflix He had an offer in mind for Antiok. Oh an offer. Said that Antiocha would be a fool to refuse. I ran It wasn't just Hastings who thought he was holding the winning hand and Taco was convinced. It was he that ace. In truth, they were both close to folding, but Hastings. The founder of Netflix could not fathom how blockbuster could replicate the complex intuitive online user interface that he and his co founder Mark Randolph had slaved over for seven years, but blockbusters Antiochos thought he had done just that thing. Here's how on Tiako remembers that call from

flicks is Hastings, Hey John. I heard you might be in town for Sundance this year. As a matter of fact, I am well listen. Maybe we should get together and talk. Must be in my Chalet in park city all day long as at lunchtime today, work for you sounds like a good idea when hung up said with a slight sneer. Of course, Chalet Park City Anti going its blockbuster teamware at Sundance to place their orders for the latest dvd releases and wild schmoozing. He picked up a piece of intelligence. Word was net. Was not doing well possibly on the ropes. In fact,. Tasting sat alone in his chalet waiting is

Trade, a warmed a bit and the voices of festival goers echoed along the street outside he loved park, cities quaint little town with its clock tower swank shops in an old fashioned theater marquee. He bought an old red brick meeting house with a steeple and stain glass windows in converted it into a vacation home. Here he and his wife Patty, and their two children now in middle school could escape from overheated tech obsessed Silicon Valley to ski hang out during school breaks. That sort of thing he hoped that the family trips made up for all the time that Netflix had sucked away Hastings stayed home in Santa Cruz in Northern California, when Patty took the to ITALY for a study abroad year. Meanwhile, back in Wall Street

blockbuster rolls out its online rental service. A new challenge to already struggling Netflix when came out about blockbuster online Hastings opened his laptop to take a look. He shook his head and chuckled to himself wow. This is a shaggy dog of a website, I can do better than this sitting at any cafe in the world just using my laptop, but he had under arrest, made it on taco, or maybe overestimated his own hand. In truth, they had both miscalculated the search for each others. Jugular would become an acquired taste. Hastings had worked obsessively on the code for Netflix is powerful, algorithm, the track web visitors, every movement in preference amassing an unmatched treasure trove of information. Supremacy of this powerful data sucking engine Hastings

eventually learn that Netflix was a shakier vessel, then he realized his. Founder Mark Randolph and describe the struggle to keep Netflix alive, pissing blood for years, hey taste the house alone waiting for on Acco Weather than flicks gurus had struggled for nothing hinged on the outcome This meeting first, he would get on Tiako to admit what. Netflix is data showed that blockbuster was going broke, trying to kill Netflix with its new total access program, see total access, let blockbuster online. Subscribers returned their dvd's to any of blockbusters. Seventh one thousand american stores and Renton movie immediately. Netflix just couldn't match that kind of convenience. But Hastings New Antiochos pressure, point actually blocked.

Sure was losing money on every transaction. The big chain was already billion dollars in debt and Antiochos Board of directors, led by billionaire investor Carl Icahn. They were yanking on the range hasting and to swallow his pride and beg on Tiako to sell in blockbuster online or both companies would die in a slow murder suicide. Surely antiocha would get this, but if an Tiako refused and total access continued well, Hastings would have to report Netflix first everlost of subscribers Netflix Stock price would start melting down along with its equity. By the second quarter of no growth, Netflix would be finished. The company's share price would collapse, along with it,

ability to borrow money to sustain operations unless well. Blockbuster went belly up first from its debt and so as he waited for Auntie Ocho to arrive. Hastings reflected on the fact that he had repeatedly and publicly dismissed blockbuster is technologically inept. He wished. He hadn't said that most people who know Hastings I'll say that he is a genius and visionary. They also say he does not comprehend people all that. Well, especially when they act in ways that he considers illogical. And that's how we came to underestimate Jananti John and the boys at blockbuster online. They were illogical

I'm Tiako, spotted Hastings, shall lay hold up to the curb at yucca, took a few moments to savor his vindication, the sheer arrogance of Hastings. You didn't Think we could figure this online thing out. Did you read warmed by the heated seat? He paused and listened to the engine? Tick? Is it cooled? Put on his game face walked up the snowy walk to the wide wooden porch and raised his fist. John Antioco had been through two years of hell, He had waited for seven years for Viacom to split off blockbuster as a public company in two thousand and four, so he could run it the way he wanted. Video stores were dying in Antiok, oh new it once Viacom cut him loose

He needed to catch Netflix, reduced the number of video rental stores and late fees. An move into digital delivery before the eight billion dollar industry shrank to nothing. To do all that he desperately needed control of the six billion dollars that blockbuster generated every year. But blockbusters Overlord Viacom extracted a five dollar per share special dividend. Only after Viacom sucked the life out of blockbuster, it's been off in late, two one thousand and four leaving blockbuster with one point: two billion dollars in debt: corporate raider Carl, I sets his sights on blockbuster. The question is whether he can actually ring profit out of this struggling movie. Rental come

antiok. I wasn't too worried about the debt until a few months later, when his bid to take over Hollywood video caught the attention of billionaire Hedge Fund investor Carl Icahn. Now I can add a reputation for buying stock in companies that he considered, undervalued and ruthlessly forcing management to cut costs, sell assets or buy back their stock at inflated prices. This insured investors of Quicken substantial profits but often left his target companies mortally Indeed, I'm Tiako had tried to take over Hollywood video five years earlier, but ran into problems with federal, Anti trust regulators. This time he figured that competition from Netflix and video on demand would make his seven hundred million dollar bid for Hollywood, video, look less antique

additive and more like an attempt to consolidate a dying industry. After all, video store Reynolds were plummeting. Everyone knew that at one time there was something like seventy thousand video stores and buy two thousand and five, almost eighty percent of them were gone. Customers simply had more choices: video on demand, Netflix and Sheep DVD, Antioch go wanted to close the under performing stores to boost sales at the help, the stores that would give them cash to invest the hundreds of millions it would now take to catch Netflix, then I Khan said is: lights on blockbuster as soon as Anti Ohko met with icon. He, he was in trouble, icons open salvo made Antiochus hackles rise. You make

too much money. He says I can't plan to quickly profit on both ends of the deal. Hollywood, video stockholders would get a premium price to sell their shares. Blockbusters stock would bump up in value just because icon was on the scene. Agitating management to squeeze more money out of the deal investors, so icon bought one hundred and fifty million dollars worth of blockbuster stock and fifty million in Hollywood. Video shares then sat back and waited for Antioch Ohko to by Hollywood video. But the federal Trade Commission had not war to the merger and there was a player in the wings. No one was laying big odds on number three video rental,

movie gallery, which offered one point: one billion for Hollywood, video antiok, oh, had no choice. He had to drop out with a company already deep in debt. He just didn't: have the money to make a counter offer. Icon was furious. The sixty nine year old, Queens native and made his name as a cut throat corporate rate. The 1980s alongside corporate inside trading felons Michael Milken and Ivan Boesky. The walls of his uh fish in the General Motors building in Manhattan were lined with frame newspaper, clippings and photos like so many hunted. Trophy heads of business titans and companies had taken down over the years. They included the former executives Biscoe, Texaco, Revlon time Warner, Motorola, Marshall Fields, Phillips, petroleum and

Mens World Airlines, Carl Icahn, fails to get the blockbuster deal he wanted. And now the movie rental company is struggling to stay afloat. Icon was now stuck with blockbuster and he furious. He angrily called a panty aco and demanded that blockbuster either find a private buyer or pay him as special dividend, totaling over three hundred million dollars, Antiok Okuly refused so icon demanded a shareholder vote to put himself in two handpicked associates on the blockbuster board, but if I can't hope to shake up on Tiako, he'd find out soon enough. He'd, tangled with the

guy instead of scaring on taco. The threats made him dig in harder. Cit Ako grew up the son of a milkman, the tough Brooklyn neighborhood. He knew how to deal with bullies. He sized f icon in figure. You can take it business wars is brought to you by zoom. Zoom didn't invent video conferencing; they just made it better. Now. Zoom is how business gets done: zoom ties together. All of your communication needs into one easy app for video conferencing phone calls. Group chat, webinars and your conference rooms turn any work. Space into a modern, easy to use. Zoom room and enterprise grade video conference room design for instant collaboration. Flawless, video and audio, instant wireless content sharing and a single tap of a button to start a meeting, and

phone works seamlessly from any device as your business phone system to make and receive phone calls capture, call recordings and easily elevate from. Don't call to video if the need arises, zoom used by millions to connect around the world I wait any longer. Zoom online and set up your free account today and meet happy with Zoom. Hey. It's David I wanted to. Let you know that you can now hear add free new episodes of business wars plus are older episodes also completely ad free. Only on stitcher premium, plus with stitcher premium you'll get, access to tons of other ad free shows from the wondering network shows like dirty. John and doctor death Plus hundreds of hours of original content exclusive bonus episodes from some of your other favorite podcasts and so much more

You can sign up now for a free month of stitcher premium by going to stitcher premium com, slash wondering and using the promo code wondery then, once you signed up just download the Stitcher app for Ios or Android start enjoying to add three wondering that work experience. That's state your premium dot com, slash one three and promo code wondering I con mounted a vicious proxy battle to wrest control of black mister from Antiok. Oh, he fired off public letters to shareholders. Painting on Tiako is a greedy spin thrift who got an uncommon fifty one million dollars in pay, but no solid plan to pay down blockbusters dead or fix. It's drowning stores. Icon urged blockbuster stockholders to him and two cronies on the blockbuster board and throw ant taco off on May 11th, two thousand and five share

folders did just that, but Anti Ohko turned the tables he had a clause in his contract. They gave him a fifty four million dollar pay out. If he was kicked off the block buster Board, he threatened to activate it. I Khan had no choice but to create a new board seat for his hated rival. Then icon began a campaign of what amounted to psychological warfare aimed at forcing Auntie Akota quit. If the blockbuster ceo left voluntarily he'd have to bail, without his fifty four million dollar parachute at every opportunity. I can't ride to pub humiliate on oh and make his life difficult. Icon, demanded that board

meetings be held at his Manhattan office, far from Antiochos Dallas headquarters. At those meetings he pushed aside on Tiako Blockbusters Chairman saying he would now preside. Meetings icon seemed seem to take pleasure in letting on proposals die from neglect, more mortifying to Antioch. Oh, his team icon insisted that is twenty six, Son bread, an aspiring filmmaker way in on any of Antiochos business plan. Icon called Anti Ohko is office after hours for long winded discussions about blockbuster business when Antiochos stop taking the calls. I icon complained that

Antiochos spent more time drinking tequila on his ranch, then running the business Reed Hastings over at Netflix watch it all with wary glee. As long as icon in Antiok, oh fought with each other blockbuster would not beat Netflix. Hastings followed icons, lead deriding on Tiako publicly, when Auntie Acco announced plans, blockbuster online Hastings, practically yond blood. Lester's track record in online technology and marketing is less well developed. He told a reporter and then added dismissively. We find it unlikely blockbuster will promote their online service effectively. That was the pr equivalent of a mic drop. Antiok oh found Hastings insufferable, and then it got worse. Two years, Netflix grew almost unchallenged from two million

scribers in two thousand and four to six million. At the end of two thousand and six block installed it just about one million subscribers as it struggled with debt and technology problems in truth companies were operating on a razor's edge. Are getting dollars of the life blood of subscription businesses and Netflix, and blockbuster were pouring hundreds of millions into a grab for new subscribers. They cut their prices were bought. Ads, did deals for exclusive content, anything to set themselves up from each other they treated. It is a battle to the death, because no one knew yet whether there were enough customers to sustain Do online rental companies. Then blockbusters total access, stop Netflix in its tracks.

Somehow Anti Ohko managed to win over icon with the ridiculously expensive total access that allowed customers drop off movies, rented online and pick up movies in a blockbuster store and that collaboration made them dangerous haste. Thought as he waited for Auntie Ocho to arrive at his snowbound chalet. In just six weeks, total access had nearly doubled, blockbuster subscriber account to two million Hastings had to stop total access. Whatever it took, a sharp knock Schuck Hastings out of his reverie He met on taco with the door of the Red Brick meeting house and settle him in the living room with a beverage. The two men sat study in contrasts Hastings tall and lead war t he was a rumpled nerd with a sharp mind.

It was short on emotional intelligence, with a tendency to blurt out painful truths. Antiok OWN Eden. Stocky was a charming story Teller, with the patients in reserve of a high stakes, poker player. He was washing Hastings carefully. He waited for Hastings to come to the point. Hastings began Awkwardly John congratulations on total access. It's a great program. I wish now I'd In your team a little bit more seriously, but but John, we are going to have a serious problem next quarter with subscriber growth. If you keep this stuff up, I'm sure you guessed that right. The word from the because you're losing subscribers as fast as we're picking them up read, but you are giving away those store rentals, we figure. That's got to be costing you watt, two dollars for rental pretty soon you're going to be spinning yourself right into oblivion. You guys going to be bankrupt. The minute you quit give

the waste or rentals and raise your prices were going to start growing again. There was a moment of tense silence, as the two men weighed the steaks. Well, what do you suggest? Antiochos said John let us by your subscribers. We are better at online rental. We are just better at technology there, it was Antiochos, thought even with Netflix is imminent demise. Hastings couldn't test one last dart could e his eragon's was not dimmed in the least so Anti Ocho replied. I had something else in mind: I want to keep the stores and the online business, but

maybe there's a way for us to be partners. Maybe in a joint venture to which the Hastings replied, this is not even a business you wanted to be in John. Ok, stop right here for a moment now: you're antiok, in Hastings. Will Hastings is just made a hail Mary move to buy your subscriber base from blockbuster O antiochos thinking? Well, the hundreds of millions I've spent the barbs I've taken from Wall Street from icon from my very own board from this Hastings fella. All that is about to pay off. I got Hastings right where I want it. What was that Hastings just said this is now Even a business you want to be in John, you can imagine antiok. Oh looking down at the carpet's,

slow. Smile begins to creep across his face. I don't know about that. Hastings I think we're doing alright antiok, who agreed to bring the proposal to icon in the board. He got up to leave with a sense of exultation he knew they would show no mercy on the next episode of business, wars, Netflix and blockbuster land near fatal blows on each other, while on Thiago battles against his own board. The stock is lost, almost half its value in three years and you barely posted a profit last year and you think you're entitled to this compensation. I hope you enjoyed this first episode of business,

please subscribe on Apple podcasts, stitcher Tunein or your favorite listening app you'll find a link on the episode notes, just tap or swipe over the cover art. You'll also see some offers from our sponsors. Please support our show by supporting them. Hey if you like what you're hearing we'd love you to give us a five star rating and tell your friends about how to subscribe to another way. Support us is to answer a short survey at wondere dot com, slash survey, I'm your host David Brown, Gina Keating, author of the book, Netflix wrote this story Karen Lowe is our senior producer and editor sound design by Jeff Schmitt. Producers are Non Lopez and Ben Adair or wondering.